Declining standards at federal level have been matched by bad behaviour at state level. For an example of state politicians willing to blatantly mislead their electorates, look no further than the Victorian and NSW governments' dishonest explanation for the looming jump of about 25 per cent in the price of household gas.

The true reason for the rise is that the building of natural gas liquefaction plants in Gladstone will soon allow gas producers on Australia's east coast to export their gas and obtain the much higher prices paid on the world market. The east coast will go from being outside the world market to inside it.

The price rise is thus inevitable unless governments were to prohibit the companies from exporting their gas, forcing them to continue accepting below-world prices. There has been no suggestion of penalising the gas producers in this way. Rather, state politicians have taken up the dishonest claim of the gas companies that permitting them to build new and controversial coal seam gas plants would somehow prevent gas prices from rising or force them back down. But as any student of economics could tell you, there's no way NSW and Victoria could ever produce enough natural gas to significantly affect the world price of gas.

The price of gas in NSW and Victoria would stay below the world price only if the new producers were compelled to sell their gas to local users at below the world price. Again, there's been no suggestion of this.

Last week the gas companies' illogical argument was taken up by the new NSW Minister for Energy and Resources, Anthony Roberts. I'm prepared to believe Roberts may be economically illiterate, but I don't believe his advisers are - nor that they don't read the papers, where the scam has been exposed.

Although Roberts has replaced a minister who left the cabinet under a cloud, he seems uninhibited in his efforts to mislead the electorate.
It's hard to know whether he is simply seeking to advance the gas industry's vested interests or is setting up an alibi which allows the government to blame the inevitable jump in gas prices on those terrible people opposed to fracking.

Either way, his only crime is seeking to deceive voters. And these days that's the way everyone plays the political game, isn't it?

Crikey has a look at the lobbying being done on behalf of the natural gas (particularly coal seam gas) industry to try to demolish opposition to expanded drilling programs - Gas shortage? Tapping the bubbling wells of spin and self-interest. One benefit of Labor losing office is Martin Ferguson no longer being in Parliament - its a shame he didn't retire to obscurity instead of getting paid to do what he was doing before as energy minister - lobbying on behalf of the fossil fuel industry.

New South Wales is about to run out of gas, so says the scare campaign. It’s bully-boy tactics by Australia’s powerful oil and gas industry, designed to pressure the state government into quickly approving contentious coal seam gas projects proposed by Santos at Narrabri and AGL at Gloucester.

Federal Industry Minister Ian Macfarlane is on board, warning last year NSW would “run short of gas by 2016” and moving to knock heads together on the issue straight after the election. For months we have been hearing the same lines trotted out: how NSW is “running on empty”, suddenly needs “energy security”, and how developing its own “indigenous” gas supplies will ease prices.

Former John Howard industrial relations minister Peter Reith — whose recommendation to lift fracking bans was ignored by the Victorian government last year — used his column in Fairfax papers yesterday to accuse the O’Farrell government of abandoning the CSG debate, warning “there is a real prospect Sydney could suffer gas shortages”. Reith failed to disclose his consultancy with construction giant Bechtel, a major contractor to the CSG industry.

Former federal energy minister Martin Ferguson was appointed chair of new advisory group APPEA (“the voice of Australia’s oil and gas industry”) in October, barely six months after he stepped down from his cabinet post and only weeks after retiring from Parliament — flouting the 18-month cooling-off period required of ex-ministers under the lobbying code of conduct. Ferguson had a dig at his erstwhile NSW Labor colleagues for “parroting the lines of the Greens and showing itself to be completely irrelevant to the debate”, urging Premier Barry O’Farrell to break “the impasse preventing the development of the state’s abundant gas resources to put downward pressure on rising prices”.

The ABC’s fact checkers concluded Macfarlane’s alarming claims about a NSW gas shortage were “unverifiable”. They were way too generous. The claims are rubbish, designed to confuse the public. Here’s what they’re not telling you:

* No one is going to run out of gas;
* Developing CSG in NSW won’t lower rising gas prices;
* It’s too late anyway for NSW CSG to ease the current uncertainty affecting gas markets; and
* There are plenty of alternative sources of supply for NSW.

Australia has an incredible amount of gas; we’re about to overtake Qatar to become the world’s largest exporter of liquefied natural gas. Between Western Australia, the Northern Territory and Queensland, seven LNG projects worth more than $200 billion are on the go.

The chart above shows three seriously big gas resources that supply the southern and eastern states: the massive coal seam gas in Queensland’s Bowen and Surat basins (41620PJ), plus conventional gas in the Gippsland Basin (3890PJ) and the Cooper Basin (1835PJ). Not shown but certainly exercising the mind of investors is a vast potential resource of tight and shale gas in the Cooper Basin — which may turn out to be bigger than CSG in Queensland, and which oil majors like Chevron and BG Group are scrambling to invest in. By comparison, the coal seam gas discovered in NSW is significant, but no game-changer: Santos has 1426PJ in the Gunnedah Basin, which accounts for half the state’s known reserves.

Overall, there is no doubt Australia has enough gas in the ground to supply both the domestic and export markets. As a country we can afford to think strategically, pick and choose which gas fields we develop, and in what order.

As the Australian Energy Market Operator found last year, if there’s one place in Australia susceptible to shortage it’s Gladstone in Queensland. That’s where three massive LNG export projects operated by BG, Santos and Origin Energy are about to treble gas demand in eastern Australia — ultimately representing some 80% of total gas demand in the eastern market — once they begin to come online later this year. By exposing the domestic market to higher international LNG prices of around $14-15 a gigajoule (which are geared to the oil price), the LNG projects are going to double domestic wholesale gas prices, from around $3-4/GJ to $8-10/GJ and higher, inevitably pushing up retail prices (as NSW saw last week).

The three big projects in Gladstone were approved quickly in 2010 and 2011 — without any strategic consideration of the impact on the domestic gas market — in a rush to sign lucrative contracts with buyers in Asia. It’s a bold experiment; the world’s first attempt to convert coal seam gas into LNG for export. Nobody knows yet if the thousands of CSG wells required to feed the six big LNG liquefaction units (or “trains”) under construction — each one consuming roughly as much gas each year as say Queensland or Victoria, so adding six new states’ worth of demand to the network — can be drilled fast enough, and will flow enough gas for long enough, to fulfil those contractual commitments.

Legendary hedge fund investor Jeremy Grantham says there is no doubt that solar and wind energy will “completely replace” coal and gas across the globe, it is just a matter of when.

The founder of $100 billion funds manager GMO Capital is known as a contrarian. But he suggests that the pace of change in the fuel supply will surprise everyone, and have huge implications for fossil fuel investments.

“I have become increasingly impressed with the potential for a revolution in energy, which will make it extremely unlikely that a lack of energy will be the issue that brings us to our knees,” Grantham writes in his latest quarterly newsletter.

“Even in the expected event that there are no important breakthroughs in the cost of nuclear power, the potential for alternative energy sources, mainly solar and wind power, to completely replace coal and gas for utility generation globally is, I think, certain.

“The question is only whether it takes 30 years or 70 years. That we will replace oil for land transportation with electricity or fuel cells derived indirectly from electricity is also certain, and there, perhaps, the timing question is whether this will take 20 or 40 years.”

Grantham’s predictions go against the conventional wisdowm of the fossil fuel industry, but they the thoughts of many people, including Stanford researcher Tony Seba, who said last year this could occur within a few decades.

And Grantham says it could happen quicker than even he believes, and will have major implications for new investments in the fossil fuel industry – a topic very much in mind for project developers and bankers in Australia.

“I have felt for some time that new investments today in coal and tar sands are highly likely to become stranded assets, and everything I have seen, in the last year particularly, increases my confidence,” Grantham writes.

ExxonMobil insists a floating liquefied natural gas processor is the preferred way to develop the big Scarborough offshore gas project in Western Australia, despite its partner BHP Billiton talking up an alternative model.

ExxonMobil has approval from the government to develop the project using a floating processor, but that did not stop BHP's petroleum chief Tim Cutt suggesting last month that connection to an existing gas processing plant may be preferable. ''Developed capacity … is typically a more cost-effective and value-accretive way to go,'' Mr Cutt said.

The North West Shelf, which is partly owned by BHP, looms as the logical place to process Scarborough gas if the floating option is abandoned, given its proximity and the fact gas production at the shelf will soon plateau.

Royal Dutch Shell has ruled out any commitment this year to the development of its Arrow liquefied natural gas venture in Queensland and signalled a more rigorous approach to other new projects in Australia, where it is also considering big asset sales. ...

Speaking after Shell reported a 70 per cent slump in fourth-quarter profit, the company's new global head named the $20-billion-plus Arrow LNG venture with PetroChina among the next potential wave of LNG investments for the oil giant, alongside the Browse floating venture and others. But he said Shell had deferred the project, deterred by ''the economics and inflation risks''. The delay is the second for the struggling Arrow venture, where at least 250 jobs were cut in January.

Speculation is increasing that Shell and PetroChina will sell their gas to one of the three LNG plants being built in Queensland, either for an expansion, or to supplement initial inadequate supplies.

Gregory Mark co-owns Aeromotions, which builds computer-controlled racecar wings. To make those wings both strong and lightweight, they use carbon fiber. No surprise there—it's the material of choice for many advanced motorsports parts. The problem is that making custom racecar parts out of carbon fiber is daunting. The only real method available is the expensive and difficult process of laying up carbon fiber pieces by hand.

To improve the process, Mark looked to 3D printing. But nothing on the market could print the material, and no available materials could print pieces strong enough for his purposes. So Mark devised his own solution: the MarkForged Mark One, the world's first carbon fiber 3D printer.

Mark debuted his Boston area-based startup MarkForged at SolidWorks World 2014 in San Diego with a working prototype. The Mark One can print in carbon fiber, fiberglass, nylon and PLA (a thermoplastic).

Tom Whipple at the FCNP has an article on the cold fusion / free energy world, displaying rather less skepticism than I feel comfortable with (but I guess it's a change from the intense doomerism he traditionally emanated back in the heyday of peak oil) - The Peak Oil Crisis: Hydrinos In Your Future?.

In recent months I have written about the progress being made in “cold fusion” which is short hand for a third way to extract energy from the forces binding atoms together. Some who are familiar with the details of what has been going on appreciate that we are nearly over denying that cold fusion is real as at least three companies have mastered the technology at lab bench level and are working on commercial-scale hydrogen powered devices that hopefully will one day replace fossil fuels as a source of energy for heat, electricity, and transportation.

The Italian developer Rossi seems to have linked up with a North Carolina company that not only is supplying the cash he needs to develop a marketable product, but apparently has made contacts to develop the technology in China.

The California company Brillouin was recently the subject of a series of videos detailing the current state of development of the prototype commercial boiler it is developing along with SRI to replace fossil fuels as the source of heat in electric power stations. Moreover Brillouin has recently licensed its technology to a Korean manufacturer who hopes to have a prototype in operation before the end of the year. The major take home from the videos, however, is that scaling up cold fusion from lab bench to commercial boiler size will involve some difficult engineering.

The third major contender in the race for cold fusion, Defkalion Green Technologies, announced last week that they are making good progress and hope to “commercialize’ their technology by the third quarter of this year. All three of these companies say they have had their technology verified by outside scientists, but have no intention of releasing their proprietary techniques as to how they make cold fusion work at this time.

Last week another contender in the race to replace fossil fuels resurfaced with the announcement by a New Jersey company, BlackLight Power, that it has applied for a patent and will be demonstrating its technology to selected observers on February 28th. BlackLight Power and its technology has been around for over 20 years; has raised and spent circa $80 million developing their technology; and have released a mountain of reports, data and even books describing how their technology works. Every few years they have announced that they were close to a commercial product that could produce heat, but somehow they always slipped back into the R&D mode and were largely forgotten even by close observers of the field and certainly not remembered by the mainstream media.

The biggest problem with gaining acceptance for the technology that BlackLight Power claims to have invented that it is so revolutionary that, should it pan out, the world and much science will never be the same. The simple version of BlackLight’s technology is easy to understand. By taking hydrogen atoms (protons with an electron orbiting around the nucleus), all one has to do is give the atoms a good zap of electricity in the presence of the right catalyst and the electrons drop down into orbits closer to the nuclei – releasing very large amounts of energy in the process.

After the hydrogen atoms’ electrons falls into a lower orbit, the resulting now-shrunken atom was called a “hydrino” by its discoverer, Randell Mills. The main problem with this idea is that our current chemistry says there are no stable states of hydrogen below what is known as the base state. Therefore most scientists say Mill’s hydrino thesis must be wrong. For 20 years, Mills has had to contend with an endless string of naysayers, including some very well-known scientists many of which called him a charlatan for raising and spending some $80 million dollars in search of something which cannot possibly be true – or so they contend.

A pair of utilities, Minnesota Power and Manitoba Hydro, have inked a Renewable Optimisation Agreement (ROA) under which electricity from excess wind produced in North Dakota can be stored in Manitoba’s hydro reservoir when loads and prices are low, with the potential for selling that power back onto the huge United States Midwest Independent Transmission System Operator (MISO) market at times when needs are high.

The deal involves the pair building a new 400 mile 500 kV transmission line, with a capacity of 750 megawatts, connecting northeastern Minnesota with Winnipeg, at a cost of $1bn split between the two utilities. ...

The province lies at the centre of a 400,000 square mile watershed that drains from the Rocky Mountains to the west and Lake Superior to the east. The Nelson River drains north to Hudson Bay with an average flow at the sea of 115,000 cubic feet per second - eight times that of the Colorado River.

Manitoba's 1,000 feet of hydro-electric potential remains only half developed and two new hydro projects with associated storage planned for the Nelson River has created the opportunity for further interconnecting the Manitoba battery to MISO.

The chances of the West Australian electricity grid becoming the first to fall victim to the so-called “death spiral” for utilities appears to have increased after it was revealed this week that the gap between the cost to generate, transmit and sell electricity and the charge to consumer has widened.

The “death spiral” is a term coined by utilities in an attempt to defend their business models against the rise of the “pro-sumer”, customers who are no longer just buying energy but who are sourcing cheaper electricity from their own generation, usually rooftop solar, and cutting demand from the grid.

The WA grid, however, has helped create its own death spiral because it has never recovered the cost of its largely fossil-fuel fired electricity from the consumer. The costs keep rising, and now it has emerged that electricity demand has fallen so low that the major utilities may be forced to pay for fossil-fuel generation they will never use.

It is hard to imagine a more unsustainable situation, and it is quite possible that the WA grid is the most at risk in the developed world from the emergence of cheaper solar and storage solutions.

Synergy, the WA Government-owned electricity and gas retailer that has just been merged with the government owned generator Verve Energy, revealed this week that the gap between consumer bills and the cost of delivery through the grid had blown out to nearly $500 million in the 2013 fiscal year.

This is despite the fact that residential power prices have risen 70 per cent since the Barnett government came to power in 2008. Synergy told the Upper House financial estimates committee that consumer bills would have needed to increase by another one third in 2012-13 to match the cost of production.

Synergy CFO Karl Matacz told the committee that solar panel installations, which have grown from zero to 130,000 in just five years, continue to grow at a rate of more than 2,000 a month, despite the removal of feed in tariffs. ...

If the WA government was to lift the consumer price to reflect the actual cost of generation and delivery, this would put the retail price at close to 40c/kWh. That compares to around 15c/kWh for rooftop solar PV. The difference provides an awful lot of room for alternatives such as storage, and even micro-grids to fill the gap.

The Energy Report: Bill, you published a book six months ago, "Cold, Hungry and in the Dark: Exploding the Natural Gas Supply Myth," questioning the conventional wisdom of shale gas. Have events supported your thesis?

Bill Powers: Yes, absolutely. Several of the predictions I made in the book have come true since the book hit the shelves in July. First, we've seen numerous shale plays head into decline. We've seen big declines from the Haynesville as well as the Barnett. The Fayetteville is in decline; there have been further declines in the Gulf of Mexico and Wyoming. But what has really changed is the North American natural gas market has become extremely unbalanced, which was what I had predicted would come to pass sometime in the 2013–2015 timeframe. The cold weather over the last six weeks has accelerated what I have been talking about in the book.

TER: How so?

BP: I predicted that gas prices would lead to layoffs and industry supply disruptions, and that's already occurred. We've seen paper mills in New Hampshire lay people off because natural gas prices in New England were north of $50/million Btu ($50/MMBtu) for a period and remain very high. We've also seen incredibly high prices in New York, and this is a time of record production coming out of the Marcellus. These are really the first examples of the violent price spikes and industrial shutdowns we will see in other parts of the country.

Across the U.S. over the next several years, I predict we will see spikes of very high prices, which will fall back to higher levels than they previously reached. Then, as the next weather event comes, prices will spike to new highs. That has already happened in New England and other areas of the Northeast in part because those areas are supply-constrained due to limited pipeline availability, but also because of increased demand.

The Northeast has also had several nuclear power plants close. Just recently the Vermont Yankee closed. Nuclear power plants have closed over the last decade or so in Maine as well as Connecticut. Much of this capacity has been taken up by increased natural gas demand for electricity generation. So you've had constrained supply because of the limited pipeline capacity and increased demand. In addition to the new demand from electricity generation, significant new demand in the Northeast has come from people converting from heating oil to natural gas furnaces.

Also, there's been a huge disappointment in supply coming from Canada into the Northeast U.S. because Sable Island production offshore Nova Scotia has been so low compared to some very lofty original expectations. We've just had Deep Panuke come on in late 2013 after several delays and many cost overruns, but the pipeline that services those offshore fields in Nova Scotia is not even close to full, and the fields will be depleted fairly rapidly over the next three to seven years. This will be a period of continued supply constraints for New England. The Marcellus and Eagle Ford are the only two fields that are still growing, and I expect the Marcellus to flatten out in 2014. Additionally, we are going to see supply constraints throughout much of the rest of the United States over the next several years.

TER: The pipeline companies have acknowledged that there's a supply constraint. Haven't any of them made plans to extend lines to the Northeast?

BP: Yes, that is happening, and some of them are probably going to increase throughput from the production growth in the Marcellus, but there will be significant calls on Marcellus production, which is probably going to peak this year.

The U.S. Energy Information Administration late last year put out a white paper that talked about how gas production is becoming more efficient. But this white paper did not include the Barnett Shale, which is in steep decline now. It's true, efficiencies have been gained over the last several years, such as the way fracking has changed, and operators are becoming more efficient in fracking, with longer laterals. But what is really happening is the completion of the inventory of previously drilled wells.

When companies ramp up their drilling activity, they often will drill more wells than they actually complete due to lack of pipeline capacity. Just recently, there have been about 200 wells in the Marcellus that were waiting for pipeline connections or to be fracked. A lot of those wells have been fracked over the last six months and the inventory continues to go down. I believe that inventory will be depleted by Q1/14, and given the drilling activity, the very high decline rates of the wells and the number of rigs running in the Marcellus, further growth is not supported. The Marcellus is still a very significant field, the biggest in the United States. When it peaks out it will probably plateau for a while, depending on activity levels, but it still will not be able to make up for falling production in nearly every other region in the United States. When this happens, we will see price spikes more frequently.

While I rarely agree with Ambrose Evans-Pritchard I do appreciate his continual columns on the energy industry and related topics. One recent column of his looked at oil price movements in the near term, predicting that oil prices may fall due to a surge in supply (and moving on to the even less likely conclusion that this will be the trigger for global deflation - surely the economic stimulus caused by cheaper energy would outweigh the loss in income for oil suppliers !) - Coming 'oil glut' may push global economy into deflation.

Personally I think the US shale oil boom will end pretty quickly if oil prices drop much below current levels so there's no chance of any long term "oil glut" depressing prices for any significant period of time. I do agree with his concluding paragraphs at leas...

To avoid confusion, let me be clear that the dangers of dwindling oil supplies in the long-run have not gone away. Easy reserves of crude are being depleted. New fields are more costly. Peak oil may have the last laugh. Yet this should not be confused with the short-term risks of deflationary shock.

I recently attended a Transatlantic Dialogue on Energy Security with senior military officers in London and Washington. The message was that shale will come and go - with US tight gas peaking by 2017 - creating a false sense of security as the deeper strategic threat continues to build. That is broadly my view as well. Much drama can intrude along the way.

There is a limit to what Saudi Arabia can do to limit supply. Lewis estimates that it would have to cut output by a quarter to stop the bottom falling out of the market, but Ambrose Evans-Pritchard of The Telegraph says this would push its budget into deep deficit and endanger the welfare subsidies required to keep a lid on tensions in its Eastern Province and the aggrieved Shia minority.

Europe is clearly at the greatest risk of falling into a Japan-style quagmire of long-term deflation and depression, caused by a combination of fiscal austerity and zombie banks.

Last week a report by researchers in Berlin and New York estimated that European banks have a capital shortfall of up to $US1 trillion, with French and German banks in the worst shape. Global bank regulators have let them off the hook to some extent by not increasing the leverage ratio as much as expected, but they still have a long way to go to get their balances sheets back to non-zombie status.

In that context a big drop in the oil price – a reverse oil shock – would not necessarily be a good thing, as you might think.

In theory deflation causes demand to shrink and the value of debt to rise, although in practice during the 19th century prices halved and output increased seven fold. The difference this time is the existence of so much debt and the fact that so many banks are still under-capitalised.

And in addition to Europe, China’s economy has serious problems with debt and falling money supply. Ambrose Evans-Pritchard wrote the other day that “China looks eerily like the US in 2007 when broad money buckled.”

If Chinese demand collapses at the same time as an oil supply glut emerges and United States imports continue to fall, we could find out what deflation in the modern world means in practice, instead of just in theory.

Last week, amid the media furor over the "polar vortex," the White House did something pretty unusual. It released a highly produced scientific video titled "The Polar Vortex Explained in 2 Minutes."

In the video, White House science adviser and physicist John Holdren dismantles silly claims that cold weather refutes global warming. "The fact is that no single weather episode can either prove or disprove global climate change," explains Holdren. He then describes how, in fact, climate change could make extreme winter weather in the mid-latitudes more common. "A growing body of evidence suggests that the kind of extreme cold being experienced by much of the United States as we speak is a pattern that we can expect to see with increasing frequency as global warming continues," Holdren asserts.